On the (Fleeting) Existence of the Main Bank System and Other Japanese Economic Institutions

Abstract

In an accompanying essay to be published in the same journal, Professors Miwa and Ramseyer (M&R) argue that most of the comparative corporate governance academy interested in Japan has been chasing a myth. The myth, which M&R largely attribute to economist Masahiko Aoki's influential theories tying Japanese production to a system of delegated bank and governmental monitoring, is the existence of the "main bank system" and the related institutions of lifetime employment and keiretsu groups.

In this essay, I critique M&R's revisionist thesis. After a brief survey of formative events in the creation of the "conventional wisdom" about Japanese corporate governance, I present data and analysis that call into question the significance of the evidence relied upon by M&R to substantiate their claims. Next, I sketch a legal and norm-based analysis of postwar corporate governance that complements Aoki's economic perspective. I conclude that while M&R provocatively challenge several stylized facts, they do not ultimately cast great doubt on the power of Aoki's theoretical construct or the (past) existence of Japan's institutional setting for corporate governance. Interested observers can rest at ease: these economic institutions did exist. Attention can now turn to a more pressing issue: how best to replace them.

Keywords: Main bank, keiretsu, Japanese corporate governance

JEL Classification: G21, G32, K22, O53